We present the qGaussian generalization of the Merton framework, which takes into account slow fluctuations of the volatility of the firms market value of financial assets. The minimal version of the model depends on the Tsallis entropic parameter q and the generalized distance to default. The...

Diffusion in a linear potential in the presence of position-dependent killing is used to mimic a default process. Different assumptions regarding transport coefficients, initial conditions, and elasticity of the killing measure lead to diverse models of bankruptcy. One "stylized fact" is...

We study the probability distributions of daily leverage returns of 520 North American industrial companies that survive de-listing during the financial crisis, 2006–2012. We provide evidence that distributions of unbiased leverage returns of all individual firms belong to the class of...